Powerful Column About Out-of-California Migration
The upcoming departure of Toyota’s headquarters from California to Texas has sparked renewed interest in the topic of companies migrating from one state to another. Also, individuals are moving from states with high income taxes to states with low income taxes or no such tax at all.
A new analysis contains striking findings about relocations – see economist Art Laffer’s new Investor’s Business Daily column, “California’s High-Tax, Big-Government Comedown.”
This is a good time to address a new twist in out-of-California migration. It appears that more soon-to-be-retired individuals are planning to pack their bags for states with a friendlier attitude towards taxpayers.
The reason seems to be that California taxes all 401K, Traditional IRA, and pension distributions as ordinary income. This is so even though there is nothing “ordinary” about accumulated wealth. For example, an individual who has worked 40 years, but only 10 of those were in California, will pay taxes to Sacramento on all distributions stemming from 30 years of income earned in other states.
There are states with income taxes that permit such distributions to be completely exempt. Of course, states with no income taxes don’t take a penny of the distributions. Kiplinger says “the Golden State is a retiree’s tax nightmare.” It’s easy to compare the tax consequences of retiring in California with other states by going to the State-by-State Guide to Taxes on Retirees.
Considering how big a bite Sacramento wants, some retirees feel that the sunshine and nice beaches aren’t that alluring anymore.
Anyway, Mr. Laffer’s column takes a deep and valuable look at moves out of California. It’s well worth reading.Explore posts in the same categories: Business Relocation, Businesses leave California, California Out-Migration, California Taxes, Income Tax, Leaving California, Site Selection, Worst States for Business